Prejudgment Interest Award Following Appraisal
Why do insurance companies get to play the float in some jurisdictions? After all, most regulations and good faith duties require prompt payment. Without penalties or awards of prejudgment interest, rules of promptness become meaningless because there is no accountability for claim delay.
A recent Florida case that was resolved through appraisal still resulted in an award of prejudgment interest in North Pointe Ins. Co. vs. Tomas, No. 3D08-2245.(Fla. App. 3rd DCA, August 26, 2009). The facts set indicated the following:
The Tomases made a claim with their homeowners' insurance carrier, North Pointe, for a complete replacement of a marble kitchen floor damaged as a result of dropping a pot on October 23, 2005. After investigating the claim, North Pointe determined that the loss was excluded under the policy and denied coverage. The Tomases filed a petition to compel appraisal under the terms of the homeowners' policy. In a letter dated September 5, 2007, North Pointe withdrew its previous denial of the claim, admitting coverage and stipulating to attorney's fees up to the date of receipt of the letter. The claim went to appraisal and North Pointe paid the claim on May 14, 2008. On June 10, 2008, an appraisal award was entered in the amount of $115,899.52, including prejudgment interest from the date of the loss. The Tomases moved to confirm the appraisal award and for entry of final judgment. The trial court granted the motion to confirm the appraisal award, including attorney's fees and prejudgment interest from the date of the loss.
The Court upheld the award of prejudgment interest reasoning the following:
In Lugassy, the question was from what date prejudgment interest starts to run where the insurer denies coverage and is later held liable for the claim…The general rule is that interest on a loss payable under an insurance policy is recoverable from the date payment is due pursuant to the provisions of that policy. Lugassy carved out an exception to that rule where the insured denies coverage and later admits coverage or coverage is later determined through litigation. Once the insurer denies coverage, it is deemed to have waived the policy provision for deferred payment and, should it pay, becomes responsible for prejudgment interest from the date of loss. "[I]f the insurer denies liability, interest begins to run from the date of the loss, even where the policy provides for payment at a later date." Lugassy, 593 So. 2d at 572.
North Point denied coverage for the claim. Even though it later agreed to appraisal and paid the appraisal award, it is deemed to have waived the policy provision allowing deferred payment and is responsible for prejudgment interest from the date of the loss. See Lugassy; accord State Farm Fire & Cas. Co. v. Albert, 618 So. 2d 278 (Fla. 3d DCA 1993) (holding that prejudgment interest is payable from the date of the loss); see also Liberty Mut. Ins. Co. v. Alvarez, 785 So. 2d 700 (Fla. 3d DCA 2001) (making distinction that, where there is no denial of coverage, prejudgment interest is payable from date of appraisal as opposed to date of the loss). We affirm the trial court's order confirming the appraisal award and awarding prejudgment interest from the date of loss.
Chip,
I'm curious as to your opinion of how this ruling would apply to claims where some damages were paid initially, say, repairs to a tile roof..Then, through re-opening the claim later and obtaining a settlement for complete roof replacement through the appraisal process.
Is accrued interest due in those instances?
Gary,
Great question! Timely, relevant, and something that has been on my mind.
This is even more so since I am working on my Post for tomorrow regarding Don Bauermeister's presentation at the Bad Fatih Institute yesterday in Vegas. He is brilliant. I feel so energized about going to the mat with some of these ideas following the Bad Faith Institute that just finished. The speakers and my colleagues were at a very high calibar. I hope Dick Slawson will organize this again next year.
My feeling is that the law should not promote slow paying insurance companies and those that do not timely pay undisputed amounts of benfits right away. If judges really want to promote settlemment of claims and society wants insurers to have accountability for their good faith promises and obligations that are required under contract and in regulations, the common law needs to reflect the payment of interest to policyholders when insurers wrongfully pay slow and too late.
Under your hyothetical, current Florida case law is not helpful. I may be willing to take that case law on after reflection following this seminar. I will write more about this by Monday at the latest. I am also typing this at at the Vegas airport, off the top of my head, listenning to Def Leppard screaming in my ear, so it is a bad time to "guess" about your very subtly complex scenario.
However, with the recent Florida prompt payment statute that Republican State Senator Jeff Atwater pushed through, there is an argument much more in the policyholder's favor.
In Texas, there are Chap 542 18% interest penalties for policyholders that may suggest that a re-opened case should be lititgated rather than appraised.
I am dead serious when I have suggested in the past that some public adjusters are going to get sued in a class action for not making their clients aware of the interest availble in Texas for delayed and wrongful claims handling. Some public sdjusters just push claims disputes into appraisal. Such interest would pay for the fees of the public adjuster and the attorney. 18% is not a small amouunt after a year to 24 months.
There are many attorneys that, unlike my firm, do not appreciate public insurance adjusters. These colleagues of mine question whether consumers are being properly served on "re-opened" claims when matters are simply sent to appraisal without a full legal analysis of what is best for the consumer.
I wanted to thank you for this great read!! I have you bookmarked to check out new stuff you post.